June 2011

December 21, 2009

Invading the IRA? Think Twice!

Any withdrawals from an IRA you might take for your child or grandchild’s education (as well as your own or your spouse’s) can be withdrawn without the usual 10 percent penalty on early distributions before age 59 ½.But, should you really do that?

Many people set up IRAs specifically for education savings purposes.Is it the best idea?For some it may be a very good approach.For others, and let me go out on a limb and say for most people, there are better approaches for saving for college, including what’s often referred to as a 529 plan.

Raiding an IRA for education may be most appropriate if the IRA owner doesn’t need the IRA money.Another consideration for appropriateness of an IRA withdrawal for education purposes is if the taxpayer is in both a low tax bracket and has little or no current income to fund education expenses.